Bureau Vows To Tighten Its Audits Of Circulation

By JACQUES STEINBERG

Published: November 12, 2004

The leaders of the Audit Bureau of Circulations outlined steps Thursday to bolster confidence in the circulation figures reported by newspapers and magazines, saying that they will hire dozens more auditors to root out fraud and that they will tighten rules enacted three years ago that liberalized the definitions of a paid copy.

The efforts by the audit bureau, a nonprofit organization of publishers and advertisers charged with collecting and verifying circulation data, are a response to disclosures this year by four newspapers that they had inflated their circulation by tens of thousands of copies. In a reminder of the continuing financial repercussions of those acknowledgements, one of the papers involved -- Newsday, which is owned by Tribune Company -- announced yesterday that it was eliminating about 100 jobs, some of them through layoffs.

Michael J. Lavery, president of the audit bureau, said that recent events had taught him that advertisers expected the bureau to be more of a forensic investigator than a mere clearinghouse, handling some basic checking of publisher figures.

To that end, Mr. Lavery said the bureau would increase its 260-employee staff -- about half of them auditors -- by as much 20 percent over the next year or so. He said that the auditors' new responsibilities would including making systematic phone calls to a sampling of people identified as subscribers of the nation's largest papers, to ensure that they were not only receiving those papers but also paying for them.

The auditors will also begin making regular visits to retailers to ensure that the single-copy sales they report can be verified on site.

''Our focus now is we will catch fraud,'' said Robert Troutbeck, chairman of the audit bureau and president of Troutbeck-Chernoff, a Canadian advertising agency.

At the audit bureau's annual conference here, but out of public view, the executive board has been discussing a proposal that would make it harder for newspaper publishers to take advantage of a rule it adopted in 2001. That rule pertains to so-called third-party sales -- papers sent to homes or made available at sports events, for example, but paid for by advertisers or other businesses.

Before 2001, such papers were not counted as paid circulation. The rule was amended after several big newspaper publishers pushed to have those papers included. Advertisers and media buyers on the audit bureau board granted the request only after they were assured that publishers would provide a more detailed rendering of how those papers were distributed, said David Verklin, an audit bureau director and chief executive of Carat North America, a big media buying firm for companies including Pfizer, Procter & Gamble and Radio Shack.

Such third-party sales have allowed many newspapers to increase their overall circulation by thousands of copies, or at least to offset losses in other categories. According to an audit bureau handout, such papers now account, on average, for 2.68 percent of the total daily paid circulation of newspapers, compared with 1.59 percent in 2002.

But Mr. Lavery and others said the rule was also subject to abuse. One area of particular concern is barter, in which advertisers pay for subscriptions in a form other than cash. He said the audit bureau board was considering measures that would require publishers to provided detailed accounting of the payment method for those papers.

As they gathered under the crystal chandeliers of the Fairmont Royal York Hotel here, many of the 500 people attending the conference exuded a palpable defensiveness. Comments from some advertising buyers in attendance did little to lift the gloom. Although Mr. Verklin emphasized in a panel discussion that only four papers -- out of more than 1,000 tracked by the audit bureau -- had been found to have inflated circulation improperly, he and others warned that each disclosure threatened the confidence that some of the biggest advertisers in the world have in newspaper circulation figures.

''Everybody just needs to be aware that the essential bonds of trust between buyer and seller get eroded every time it happens,'' said Renetta McCann, an audit bureau board member and chief executive of Starcom MediaVest for the Americas.

Linda Thomas Brooks, executive vice president of General Motors Media Works, a unit of the Interpublic Group, said she had been advocating stricter guidelines on third-party sales, in part so her company could be persuaded that such papers were actually being read.

''What I want to know,'' said Ms. Brooks, who joined the audit bureau board in July, ''is that for the number of copies I'm paying for, I'm getting valuable audience, valuable readers.''